Streaming Wars Enters a Fresh Battleground: Loyalty Programs

The battle to lock down regular subscribers is leading streaming giants to look beyond content and incentivize users with additional perks. At the end of August, Disney+ confirmed it was mulling over the prospect of a membership program, with senior executive vice president Kristina Schake telling WSJ it was “one of the exciting ideas” being explored to deliver more relevant entertainment, experiences and products to customers. It’s understood the still unnamed service will look a lot like Amazon Prime, but instead of offering perks on groceries and delivery, it is thought it might offer exclusive access to Star Wars toys or Disney travel experiences. A natural evolution As the cost-of-living crisis continues, households are forced to look at their portfolio of subscriptions and consider whether they're valuable investments to keep or unnecessary expenditures to cut. So, anything platforms can do to make their offering stickier and more compelling gives them competitive advantage. For Disney, creating a membership package that sits across its ecosystem, including exclusive early access to content, line-jumping at the parks and, perhaps, a Prime-like service for toys and gifts, is an obvious next step. “This feels like a natural evolution,” said Jim Dyer, head of client leadership at Wunderman Thompson U.K. He added that, for many young families especially, the brand was a ubiquitous part of their lives, from streaming and merchandising to live events and, ultimately, park visits. You only have to look at the recent Netflix subscription numbers to see it is no longer enough to be just a streamer.Jim Dyer, head of client leadership, Wunderman Thompson U.K. Disney chief executive Bob Chapek has been vocal that Disney should use its "franchise flywheel" to cross-sell. A membership product would help the entertainment giant seamlessly bridge the gap between physical experiences, digital storytelling and ecommerce. Creating a single ecosystem would also allow Disney to glean more data on its customers based on their viewing and buying behavior, serving them more relevant content to incentivize them to spend more in the process. Streaming will play a unique role in this mix, according to Ben Williamson, senior social strategist at creative shop AMV BBDO. This is because it ensures Disney is in the home and family life of fans, helping the business understand what they care about and allowing it to bring new properties direct to their eyeballs. Disney Closes Strongest Upfront Ever With $9 Billion in Commitments He said the phrase to watch for is “might as well.” "If your son is a Marvel fan, you might as well get them Disney+. If there’s a discount on toys, you might as well get one he wants for Christmas. Since you already have Disney+, your daughter might as well try out Star Wars. Since your kids are both fans and there’s a special park experience for members, you might as well have the family holiday there, too," he asserted. "Expect Disney to notice and optimize every one of those opportunities." Streaming: No longer a standalone Though Disney has diversified streaming content with adult-based shows and movies, including recent releases such as Fresh, Pam & Tommy and The Mandalorian, the fact remains that it is a family brand: two of its biggest premiers this year included a Pinocchio live-action remake and a Lightyear spinoff. “And it is families who will be carefully scrutinizing their outgoings in the coming months and years,” Wunderman's Dyer noted. Indeed, customers are expecting more from brands as they tighten their own financial belts.In the U.K. alone, a recent poll from the Institute of Practitioners in Advertising (IPA), which questioned 2,000 people, found 33% wanted brands to offer more value on promotions and 30% wanted them to reward loyalty. “It makes complete sense," said Dyer. "You only have to look at the recent Netflix subscription numbers to see it is no longer enough to be just a streaming service.” Netflix made headlines recently after it hemorrhaged 1 million subscribers in the second quarter of 2022. The business has been forced to cut costs in the U.S, namely through job cuts to its sprawling film and TV divisions.Soon after, Disney overtook Netflix as the world’s largest streamer, with 221.1 million members versus Netflix's 220.7 million. As it looks to reclaim the crown, the latter is gearing up for the rollout of an ad-tier funded service that outshines the current linear TV ad model.“While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership [through lower prices] and profit growth [through ad revenues],” the company told shareholders in a letter in July 2022. It’s all about moving from ‘must-watch TV’ to ‘must-have service.'Dan Hulse, CSO, St Luke's However while it works on building on its commercial arm, Netflix is in a weaker position than its rivals when it comes to expanding beyond streaming. Disney's foray into membership is only strengthened by the emotional connection with its audience, where Amazon Prime—which counts over 200 million members—is built on function, utility and the promise of free, quick delivery. To complement this, Amazon's studio arm has been investing in glossy content such as The Rings of Power and The Boys. Apple too has entered the foray with star-studded shows and membership deals tied to cellphone contracts.Dan Hulse, chief strategy officer at indie agency St Luke’s, said Disney needs to play the same game as Amazon. Disney has diversified streaming content, but its heritage means a membership program could appeal to young families. "If I’m reading Marvel comics on my phone, my kids are playing ‘free’ Star Wars Lego games on the iPad and we’re getting 10% off that Disney cruise next summer, Disney stops being expendable," he observed. "It’s all about moving from ‘must-watch TV’ to ‘must-have service.’" The challenge now for Netflix is to build compelling membership packages to help families and friends share the financial burden and move beyond being seen as a luxury in tougher times. One thing is for sure: as the streaming wars heat up again, it will certainly be a "must-watch" event for investors and analysts alike. Netflix Snags 2 Snap Execs to Run Advertising Division Ahead of AVOD Debut

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The Streaming Wars Enters a Fresh Battleground: Loyalty Programs

Looking beyond content could give streamers the edge in a competitive, cost-squeezed market

Rebecca Stewart

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Rebecca Stewart